JOHANNESBURG (miningweekly.com) – In a move it attributes to the empowerment objectives of the Mining Charter and the Mineral and Petroleum Resources Development Act (MPRDA), coal and iron-ore company Petmin has finalised a R350-million broad-based black economic-empowerment (BBBEE) deal that sees its employees and the local mining community awarded a 20% stake in the miner’s Somkhele anthracite operation, in KwaZulu-Natal.

“An important component of this empowerment is in expanded ownership of mining assets.

“From inception, it has been Petmin’s strategic intention to embrace the spirit of BBBEE for the mining industry, as determined in the MPRDA . . . and [we] believe that to ensure long-term sustainable empowerment, it is imperative that local communities and employees become owners so they can participate and share in the economic benefit of our operations and beyond the life of our operations,” Petmin CEO Jan du Preez said in a statement on Wednesday.

The 1.2-million-ton-a-year, R1.6-billion Somkhele anthracite mine, which was owned by Petmin subsidiary Tendele Coal Mining, also delivered 350 000 t/y of energy coal from rewashed discard.

Negotiated with a traditional council representing the 175 000-strong Mpukunyoni community, as well as with trade unions representing Tendele employees, the landmark BBBEE deal would initially see the workers and local community owing 20% of the mine through community trusts and a special purpose vehicle (SPV) and, subsequently, through direct share ownership in Tendele.

This would reduce Petmin’s shareholding in Tendele to 80%.

Preference shares in the SPV would be issued in exchange for R270-million from a Nedbank subsidiary, and R80-million from Petmin, totalling R350-million.

These funds would be used to subscribe for the 20% shareholding in Tendele, after which 80% of the SPV shares would be allocated to the community trust and 20% to the Tendele Economic Benefits Sharing (EBS) scheme for employees.

Once all the preference shares had been redeemed, the 20% equity in Tendele would be distributed as a dividend in specie to the community trust and the EBS, which would thereafter own direct shares in Tendele.

At that time, the EBS would also have an option to acquire an additional 4% of Tendele at fair value in cash.

“The [interest in Tendele] won’t be going to one individual, beneficiary, group or nkosi, but will benefit the children of the community,” Du Preez added in a conference call on Wednesday morning.

The trust and the EBS would be further entitled to appoint one director each to the board of Tendele, providing the community and employees the opportunity to contribute to the strategic direction of the company.

Dividends from Tendele would be used to repay the R350-million preference shares plus interest, the company outlined in a statement.

“Petmin effectively guarantees the redemption of the Nedbank funding, as it will subscribe for additional preference shares in the SPV in the event of a potential default in payments to Nedbank,” it noted.

Tendele would further donate a founder’s contribution of R2.4-million to the community trust, which would be used to build a training and lecture hall at the Mpukunyoni Community Hub.

“This will be available for community youth development activities funded by the trust,” commented Tendele community relations MD Joyce Makhema.

The Mpukunyoni community would also receive a guaranteed yearly payment of R1-million to support development projects in the area, while further provision had been made for supplementary payments of up to another R1-million a year, depending on production at the mine.

Meanwhile, the EBS employee share scheme included as beneficiaries not only Tendele’s own full-time workforce, but also employees of companies in which Tendele held a substantial shareholding, and employees of any company with a long-term mining-related service agreement.

The majority of trustees of the employee share scheme would be appointed by unions that had a recognition agreement with Tendele.

According to the scheme, the EBS would receive R1 000 a year per employee from Tendele, which would increase to R2 000 a year if yearly production exceeded 900 000 t of saleable anthracite.

Welcoming the BBBEE transaction, the Association of Mineworkers and Construction Union national treasurer Jimmy Gama described the EBS as an innovative empowerment approach that would effect real economic benefits-sharing to bridge the gap between social and mining economics.

Fellow union, the National Union of Mineworkers, also welcomed the deal, dubbing it a “compromise transaction” between Tendele and Petmin.

“We say ‘compromise transaction’ deliberately. We are proud that we have won material benefits for our members. We will continue to fight in all future schemes for those benefits to be fairly divided between workers and [the] community, and for them to come in the form of direct shareholdings, free of debt,” it held.

Trade union Solidarity, meanwhile, welcomed the company’s engagement of a broad range of stakeholders during the formation of the transaction.

“It is expected that employees and members of the trade unions and the community shall reap the fruits of the investment that the company made into their financial wellbeing,” it stated.

The transaction remained subject to the approval of Petmin shareholders and approvals required in terms of the Companies Act and the listings requirements of the JSE. It was expected that the transaction would be implemented within three months.